MediaTek Inc, Taiwan’s largest chip designer, climbed to a three-month high in Taipei after saying it agreed to buy MStar Semiconductor Inc. in a transaction valuing the smaller rival at $3.8 billion.

MediaTek and MStar, both Hsinchu-based makers of chips used in televisions and mobile phones, agreed on a tender offer for as much as 48 percent of the smaller company’s shares as a precursor to a full merger that would create the world’s fourth- largest chip designer, according to Nomura Holdings Inc. The deal is the fifth-largest semiconductor acquisition in the past decade, according to data compiled by Bloomberg, and would boost the companies’ competitiveness and increase bargaining power with suppliers, Deutsche Bank AG wrote.

“Industry consolidation between these two leading fabless companies will ease competition especially for mid- to high-end product segments and thus is good for margins of the two companies,” Jessica Chang, a Taipei-based analyst at Deutsche Bank, wrote June 22 after the announcement. “This deal is the right action to take by both companies, which is going to have a profound long-term implication toward the industry.”